The Hindu Business Line : Tea troubles

A FAR-FROM-REFRESHING performance of tea exports two years in a row must make all stakeholders sit up and take note. Decline in export volumes and loss of export market share to competing producers elsewhere are surely matters of concern not only for the industry, but also policymakers. Exports in 2004 are estimated to have fallen even below the 173 million kg shipped out in 2003 which itself was lower than 201 million kg the previous year. During the last five years tea failed to break out of the low-level production trap — 830-860 million kg range — largely because of a combination of unfriendly weather and depressed prices, though consumption has been growing steadily. The industry is also beset with such long-term problems as aged plantations, worn-out machinery and poor infrastructure. The Government has set up a special fund with collections of additional excise duty on tea for the development, modernisation and rehabilitation of the tea plantation sector besides restructuring term loans, price sharing between small growers and manufacturers, and an information dissemination system. These measures are yet to show results. It is a matter of relief that the average auction price has been moving up from April 2004, while the retail prices have been more or less steady.

The Indian tea sector is at the crossroads. Stiff competition from other producing-exporting countries (Sri Lanka, China, Indonesia, Vietnam and Kenya); various tariff and non-tariff measures imposed by importing countries such as Russia, Egypt and Iran; lower offtake by Russia due to a change in consumer preference; and costlier Indian teas due to higher cost of production merit close attention. The Tea Board and the industry are not on the ball as they have failed to identify emerging varietal or quality preference changes even in such traditional markets as Russia. The tea industry has to take a call on what its priority is — the domestic or export market. With low per capita consumption (650 kg) and with rising incomes and population, the internal market should be tea producers' delight. Sri Lanka is clearly targeting India for exports. But over the years, Indian tea producers have been chasing ephemeral overseas destinations, ignoring the domestic market. Though it is not going to be a cakewalk — tea has to compete with other beverages and soft-drinks — the domestic market, if properly tapped, can absorb almost the entire output. Without sounding alarmist, it must be stated that at the current sluggish pace of production growth, India may well become a large importer.

No time is better than now to pay attention to production and quality enhancement strategies. An assessment of financial, human and technological resources to strengthen production and marketing is necessary. Tea Board should be professionalised. Active cooperation and involvement of the four principal States — Assam, West Bengal, Tamil Nadu and Kerala — that account for over 90 per cent of production is necessary in any action plan. The economic importance of tea arises from the fact that it promotes employment and social welfare in the rural areas besides generating revenue for the exchequer and foreign exchange. Arrest the drift.

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